GERMANY – Two properties re-developed by Warburg-Henderson for a value-added German open-ended real estate fund (GOEF) made up the start portfolio for a new Spezialfonds launched by the German-UK real estate joint venture.
Under German law, a transfer of properties from a GOEF into a Spezialfonds by the same company is forbidden, so Warburg-Henderson had to take a different route to satisfy clients' demand for core property with two office buildings the company re-developed.
The GOEF Deutschland Fonds Plus, a purely institutional open-ended fund, had been launched in 2008 to invest in value-add assets in good locations with the aim of developing them into core properties and then selling them off.
Eitel Coridaß, managing director at Warburg-Henderson, told IPE: "That is what we did with the properties in the fund located in Frankfurt and Berlin highly successfully in mid-2012."
Seeing the continued demand for core properties by institutional investors, the company decided to keep the two office buildings in the GOEF, the Oper 46 in Frankfurt and Puris in Berlin, to start a Spezialfonds.
"We changed the legal framework of the vehicle from a GOEF into a Spezialfonds, and one client decided to stay on in the new fund with €8m of equity while the others exited the GOEF as planned after it had fulfilled its investment aim," Coridaß said.
To Warburg-Henderson's knowledge, this is the first time such a conversion has taken place in Germany, and Coridaß noted it had taken 6-7 months to prepare "because you had to get a third party to evaluate the properties for a fair conversion price and hire an external law firm to ensure all the compliance standards are met".
Nevertheless, Warburg-Henderson, which is mainly running Spezialfonds and has only two other GOEFs on the market, is currently not thinking to convert another GOEF, Coridaß confirmed, adding "but now we know how it is done".
The new fund, named the Warburg-Henderson Deutschland TOP 5 Fonds, will be investing in Hamburg, Berlin, Dusseldorf, Frankfurt and Munich.
The fund has raised €60m in capital from institutions and is open for further investments up to a target volume of €300m-350m, including a debt capital quota of 40-45%.
The fund aims to deliver an income return of 5.25% over the entire duration of the fund.